Second-quarter net income climbed to $5.43 billion, or $1.27 a share, from $4.8 billion, or $1.09, in the same period a year earlier, the New York-based company said today in a statement.

That’s not too shabby for welfare queen. And even while CEO Jamie Dimon feigns concern over a housing market that was still working through difficulties, the bank lowered its loss provisions by two-thirds.

Provisions for credit losses dropped 46 percent to $1.81 billion from $3.36 billion as defaults and late payments declined. The bank released $1.2 billion of reserves held against future losses back into earnings.

That little rebalancing freed up $1.55 billion to settle gently to the bottom line. What happens if the reduced provisions were too optimistic? Who picks up the extra costs? Why you do silly! But earnings reports are all theater anyway, to understand the real risk and rewards to J.P. Morgan you need always to look off balance sheet.

Undoubtedly the bank’s first move of the fiscal second quarter was to squirm its way out of the massive 3.3 billion ounces silver short position it ingested from remains of Bear Stearns.

As silver approached its all-time high of $50 in April the situation for J.P. Morgan went critical. A break above resistance always brings in new buyers and hot money that propel prices higher. To have silver residing permanently above $50 an ounce wasn’t just untenable, it was unsurvivable. The math is easy: $50 times 3.3 billion equals bankruptcy. So, JP Morgan clicked their machinery into high gear, and they were effective. The house of Morgan brought the price of silver down over 30% in just the first four days of May. They accomplished it by using the CME to squeeze the longs with a sudden and ever increasing series of margin requirements:

Normally if the powers that be at the CME think a market is a bit too frothy they may raise margins to reduce speculation. This act just increases the amount of money a trader has to lay down initially in order to trade a contract in said commodity.

Silver has had its margins raised numerous times during this latest run that began in August 2010. Every time we’ve seen a correction. Mostly they’ve been sharp and relatively shallow before moving back into new highs.

This time however, after each correction the CME raised margins again, and again, and again, for a total of five times in only 8 trading days. The last margin increase was announced late in the week and will take effect on Monday May 9th.

If this were a fight, it wouldn’t be fair.

Well and nobody expects a fair fight from Dimon and gang. But this time they may have been too clever for their own devices. When silver does break $50 and stays above it you can bet that the brain trust at J.P. Morgan will be wishing that they had implemented a trading strategy to reduce its short position rather than attempt trading fraud through which they believed they could escape having to cover.

The new gold and silver exchange opening in China will “destroy” those with large short positions in precious metals, according to John Embry, Chief Investment Strategist at Sprott Asset Management.

Currently silver is knocking on $40 an ounce again.

The bank settled one of the more corrosive charges against it, regarding illegally foreclosing on active duty GIs, kicking their family’s onto the street while the GIs away at war were helpless to fight the proceeding.

Attorney General Lisa Madigan today announced a $92 million multistate settlement with JPMorgan Chase & Co. over a scheme to rig bids and engage in anticompetitive practices that defrauded local municipalities, schools, hospitals and prominent nonprofits that purchased municipal bond derivatives from the bank.

“JPMorgan Chase concocted a scheme to enrich themselves by cheating hospitals and schools out of much needed resources,” said Attorney General Madigan. “Today’s settlement will restore funding to agencies throughout Illinois for use as they originally intended – to improve services in their communities.”

Whew, cheating schools and hospitals to the tune of $92 million. Told you that Jamie Dimon was cold. But Illinois was far from alone when it came to getting screwed by J.P. Morgan:

The Securities and Exchange Commission on Thursday said J.P. Morgan (NYSE: JPM) has agreed to pay $228 million to settle allegations of rigging municipal bond deals.

As part of the settlement, J.P. Morgan will return about $51.2 million to municipalities and borrowers affected by the fraud, according to a statement released by the SEC. In addition, J.P. Morgan has agreed to pay an additional $177 million to settle similar charges brought by other federal and state

As the housing market showed signs of trouble at the end of the boom, JPMorgan became desperate to sell Squared and get it off its books. In one 2007 email, a JPMorgan Securities employee wrote to the sales team, “we are soooo pregnant with this deal, we need a wheel-barrel to move around. … Let’s schedule the cesarian, please!”

Squared plummeted in value just months after it was sold. As the SEC noted, more than a dozen institutional investors—pension funds, a Lutheran nonprofit group, Asian financial institutions, and others—saw their investments reduced to almost nothing. As part of the settlement, the investors will be made whole, a relatively rare event.

Ironically, JPMorgan was among the losers. While the bank earned about $20 million for creating the deal, it ultimately lost $880 million on the parts of Squared that it didn’t sell off to investors. We reported Magnetar earned about $290 million off its bet on Squared.

Ironic indeed that the free market took more from J.P. Morgan then the SEC ever tried to. Why else do you think they call competition a sin?

But Morgan’s legal troubles don’t end there, The National Credit Union Administration, of all things is suing J.P. Morgan for another $800 million for fraud related to the failure of five credit unions:

The National Credit Union Administration said the lawsuits seek damages in excess of $800 million and are related to the failure of five corporate credit unions.

The agency said in a statement on Monday that it may file more lawsuits in an effort to recover billions of dollars in losses related to the failure of these institutions.

Heartbreaking, isn’t it? That the bank should have to pay back any portion of what stole. But before you get all teary-eyed for Jamie Dimon and gang consider this number: $20,816,300.

Not counting options, that was Dimon‘s annual compensation last year. Not bad for a welfare recipient. And for the rest of you in the electronic bread lines J.P. Morgan says, “we are right here with you” :

J P Morgan has a food stamp monopoly in 26 states and the District of Columbia. Since Morgan gets a cut of each transaction the bank only stands to profit from hungry Americans. Given that 43 million hungry Americans use food stamps all those little cuts add up to quite a gouge. And what about the future of food stamp users in the country? Well if a high percentage of food stamp usage is good for Morgan you already know the answer to that. In fact in the video Morgan executive Christopher Paton ghoulishly admits that this is “a very important business to JP Morgan” and that it is doing very well

Of course it is, that which goes well for Morgan goes badly for the worlds citizens, it is the nature of debt money finance. And while those citizens settle into their new found poverty Jamie Dimon goes insane with genocidal profit lust.

The anti-genocide proposal was prompted by Chase’s investment in the PetroChina oil company, which human rights advocates have long accused of financing the genocide in Darfur because its parent company is a substantial oil producer in Sudan.

“There is no compelling justification for these investments,” said William Rosenfeld, founder of Investors Against Genocide, at today’s meeting. “Chairman Dimon says, ‘We have always been committed to being good corporate citizens.’ So why does the company’s board oppose this proposal?”

It’s doubtful that it ever will be or that it will appear on the 10-Q either.